Friday, November 15, 2013

Fear and Loathing in Latvia (or among its media)

Fear
and loathing in Latvia? The borrowed phrase from the late Hunter Thompson may
be just what fits the situation. Moreover, the “situation” is that nobody in
the Latvian media is fully reporting the situation, especially not reporting as
it affects them and their own people and, possibly, their sources.

I
have already touched on this in an earlier blog, but I will repeat it here. Based
on a number of sources and observations, Latvian Television has been visited by
the Latvian Security Police because of a news item that was run on September 23
concerning the possible settlement of an investment dispute surrounding the
“national airline” air Baltic. The
report cited the possibility that former air Baltic CEO Berthold Flick could be
awarded as much as LVL 16 million. This was part of a legal risk analysis
prepared in connection with the investor claim filed against the Latvian state
by Flick.

It
appears that a person involved in preparing the news item, based on a leaked
document or documents, burned the source by either giving up the documents or
other information that led to the source. All this has been hushed up or only
minimally reported, at least the media part.

While
the document or information that was leaked was something less critical than
Latvia’s nuclear launch codes (well, assuming Latvia had any), the search for
those responsible is as intense as if something like that had happened. The
Security Police questioned around 12 employees of the Ministry of Justice,
which apparently had a significant role in preparing the legal risk analysis.
This was, in fact, reported in the Latvian media. However, as far as the
apparently critical and decisive Security Police contact with Latvian
Television, there is only one line in a LETA story (a story that, of course,
could have been picked up by other media and the press). It says: As was determined by the news agency LETA,
SP (Security Police) agents have questioned representatives of the mass media. And that, so far, is all.

One
reason may be that some of those involved, for whatever psychological reasons,
simply don’t want to talk about it (it seems unlikely that the Latvian Security
Police, tried to impose a gag order on anyone like the Lithuanian Special
Investigation Service did with some of the journalists it questioned at BNS).
But there was enough information available from other sources to see that there
was a serious violation of media rights and probably a failure or lack of
journalist training.

Once
they had the necessary information, the Security Police followed the whole
chain of custody(and of production) of
the document, including the aforementioned searches and interrogations at the
Ministry of Justice, and by some accounts, at the State Chancellery as well. Apparently,
the investigations are continuing. Certainly, state employees have a duty to
protect confidential information, but as I said, these were not nuclear launch
codes.

There
is another possible explanation for the – to put it mildly- vigorous activities
by the Security Police to track down leaks. It is that the law-enforcement and
investigative agency may be being wittingly or unwittinglyused as a political bludgeon against a new
approach to settling investor disputes. In some past cases, Latvia used rather
expensive private law firms to litigate these cases – everything from the black
humor case of dismantling a derelict Swedish-owned ship to the case brought by
TeliaSonera against the shortening of the monopoly granted to telecoms operator
Lattelecom (it was ended in 2003 instead of 2013). The new approach has been to
handle these cases “in house” and to find a least-risk, least cost way of
settling the matters.

The
thing is – international disputes based on violation of investment protection
treaties are seldom frivolous. Often they involve diplomatic support from the
disputant’s nation (to be honest, I don’t know the procedures in detail). In
any case, to get your government on your side, you have to have something more
than an imaginary or crackpot theory of how your investment was compromised –
usually by using the legal system or government action by the country that is
accused of a violation.

Indeed,
some of the recent cases in Latvia – the attempt to declare the Lithuanian IKI
retail chain bankrupt over a small debt – as well as alleged shenanigans around
the Estonian-owned Winergy wind farm project – seem to suggest that frivolous
or contrived attempts to compromise foreign investments have happened with the
assistance of Latvian courts or authorities. If this is the case, then these
claims are not frivolous and the risk to
Latvia is significant. This may also have been the case with air Baltic, where
the government moved quickly, but perhaps without taking all the necessary
legal steps – to take control of the airline from what it perceived as a
untrustworthy Flick and other shady interests, including Vladimir Antonov, a
Russian businessman blamed for the failure of Lithuania’s Snoras Bank and the
Latvian bank Latvijas Krajbanka.

If
mistakes have been made by courts or state authorities, then it is not
unreasonable to assume that there are significant risks for the Latvian state
and that a negotiated settlement may be the least costly and time-consuming way
out of the situation, even if it involves “paying off” parties to the case who
are less than, as Latvians would say, “white and fuzzy clean”. Under the law,
thieves are also protected against theft.

However,
if this approach is taken, two sets of interests may suffer. First – those
parts of the legal profession in Latvia for whom endless litigation is a source
of revenue, regardless of the ethical norm that lawyers represent the best
interests of their clients, and it is rarely in anyone’s best interests to have
long, dragged out legal or arbitration proceedings with doubtful chances of
success.

Secondly,
a more forthright approach to settling investor disputes (which generally are
not initiated “just for fun”, but instead following local legal actions, such
as a crackpot insolvency case and the like) will affect the interests of
schemers who exploit foreign companies to “legally extort” money or even to
execute takeovers of profitable foreign subsidiaries (nevermind that the local
goons put in charge if this succeeds cannot continue profitable operations, it
suffices that they can empty the bank accounts). Some of these schemers, so it
is said, have friends in high places and political influence – some would even
say, some extent of state capture. However, to prove that would require some
pretty heavy legwork by local journalists, which most local media cannot afford
in terms of staff time and money. And some are simply afraid to do it because if they do, will be visited by the Security Police and no one will say or publish
a word about it.

3 comments:

One shouldn't forget the case of "Neo" who is due in court April of 2014. Whistle blowers are definitely not much appreciated in Latvia. http://tinyurl.com/pwuz5wm re:BalticaThe linked article in your post indicates that no state secrets were disclosed in the leaking of this document. Therefore given the resources being applied it is hard to not see the message being sent out to leakers/whistle blowers.